Monday, June 21, 2010

US Retail Abroad: Is the Consumer Experience Different? Should It Be?

When I travel, I always seek out the best retail in a place.  Usually it’s a brand or a format, hotel or bistro I’m not familiar with that makes the biggest impression. So I was surprised and not surprised back in 1994 during my honeymoon trip to Paris to discover a Gap outpost at Galleries Lafayette.  (Much to my new wife’s chagrin, we spent probably a bit too much time “auditing stores”.)  That was the Gap’s first foray into international markets; today they have more than 500 company-owned and franchised stores outside of the United States.
The place I bought my khakis and t-shirts at Galleries Lafayette??  Of course, to the tourist and occasional Parisian consumer, the Gap was interesting.  I still have the classic black sweater I purchased that day.

Today, retailers from abroad like H&M, Zara, or Uniqlo are seeing the US as a ripe market for expansion.  (Take a look at those stores’ Web sites—tell me if you think their product is truly unique.)  U.S. retailers having saturated their home markets are doing the same thing—looking to the emerging middle classes of countries around the world for growth.

Partnering for Retail Expansion
I was recently asked to comment on a story for Business First  about US retail brands expanding abroad, specifically in the Mid-East.  The story by Dan Eaton points out that U.S. retail brands Payless shoes, Office Depot and Starbucks partner with companies like M.H. Alshaya Co. to make that happenIn that piece, Colin O’Kane, an executive from Alshaya, says, “A customer who has shopped at a store in the U.S. should feel at home in one of the stores we operate.”


I hope they aren’t relying on customers who have shopped U.S. outlets of these brands.  Talk about niche marketing.  Yikes.  (Of course he wasn’t; I believe his point was about the appearance and operation of the stores.)

Will that be enough to sustain growth?  What about the long-term prospects of the business on the ground?  Fueled by encouraging numbers from competitors and online sales, some retailers are reporting up to 20% of their online sales are coming from non-U.S. markets, brands are very motivated to find the right market entry strategies.

Here in the U.S. we are in a “’post-brand” environment where we need to have constant dialog and build deep connections with our customers.  The brand stance alone no longer is enough for customers here. 

Is cultural relevancy relevant?
Are these brands banking on their novelty alone?  It’s hard to argue with what appears to be pent up demand for well-known U.S. brands like Abercrombie & Fitch.  

   
Take a look at this video. It doesn’t need to be translated to understand that A&F did a good job on opening day.  Critics have pointed out that the Japanese consumer culture is not as overtly sexualized as A&F is comfortable with in Western markets.  Did they offend?  Did it hurt them?  Most likely not.  They have enough brand equity to be themselves—for now.

But what of the lesser brands?  When Tesco entered the U.S. with their Fresh & Easy brand they found a niche between grocery and convenience to exploit—a unique and possibly a defendable position.  They are constantly tweaking it for American markets.  How will Tween Brands’ Justice fare in Dubai?  How much will they have to understand the local culture to make the product, environments and staff relevant? 

The merchant and its partners must understand consumers and markets as they balance maintaining a brand image amid the dynamics of a new and foreign marketplace. Companies like Alshaya give retailers “someone on the ground” who has that market knowledge and can manage the business day to day and at less expense than if the retailer staffed and ran the stores itself.

Each Brand Deserves a Unique Strategy
International influences have always been a part of retail.  The fresh, new, exotic are what drive attention and desire. The first department stores of London and Paris shaped the great emporiums here in the U.S.  It was the buyer’s imperative to go out and find the most unique and interesting product—still is.

It needs to be said that among the many ways to expand internationally, each brand does it differently.  Whether it is Galleries Lafayette, Collette, franchising, licensing or some combination of the above, there are many ways to expand globally.   Companies like Alshaya understand middle-market specialty—mostly apparel—brands and their relevancy to the consumers already shopping there.  Al Tayer Insignia understands luxury brands and thus has been tapped by Macy’s to help launch their first international store, Bloomingdales in DubaiWalmart is pressuring the U.S. government to help change the laws in India preventing it from selling directly to consumers.  Will Kroger or Target pop up in Tesco’s back yard?  Probably not anytime soon.


Relevant links

Original Business First article: bit.ly/cF0MDe

A&F in Japan:

U.S. Grocer Chains Eschew International Development http://supermarketnews.com/viewpoints/us-chains-home-growth-0531/

Retail - All Abroad: U.S. Retailers Set Sights Overseas - CNBC http://bit.ly/amiu3j

Industry Statistics - Even without Web sites customized for foreign markets, global sales are rising - Internet Retailer http://bit.ly/dbQSOH

US retailers, unsure about home, should look abroad - Reuters - http://bit.ly/dqXevw

A&F Canada, Europe, Asia: http://en.wikipedia.org/wiki/Abercrombie_&_Fitch#Expansion_campaign

Walmart's Huge Overseas Expansion Distracts From Its Domestic Saturation Problem http://blogs.bnet.com/business-news/?p=1191&tag=col1;post-2452

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